The European Union is in the process of drafting a “solidarity instrument” aimed at supporting businesses that are looking to diversify key material supplies away from China and mitigating the impact of retaliatory measures by the Chinese Communist Party in trade conflicts. However, this initiative requires financial support.
According to sources cited by Bloomberg on Saturday, this mechanism is not free and will require financial backing. Currently, member countries are in negotiations over the next multi-year budget for the EU, but several countries are considering cutting their fiscal budgets.
The mechanism being developed by the EU’s executive arm is one of the measures taken by the EU to address the current trade deficit of over 360 billion euros with China, aiming to compensate businesses that have suffered retaliation in trade wars. In theory, this mechanism provides the EU with space to escalate trade wars when necessary, as it can alleviate concerns of countries becoming targets of retaliation.
The exact amount of funding needed for the trade solidarity mechanism is still unclear. Given the scale of related industries and trade, this amount of funding could be considerable.
Sources indicated that representatives of various countries have received relevant briefings. Due to the nature of internal discussions, these sources have requested anonymity.
The European Commission spokesperson responsible for EU trade affairs declined to comment.
The EU is seeking to rebalance its trade relationship with Beijing through various avenues: direct dialogue, developing new tools to diversify supplies, and better utilizing existing tools such as anti-subsidy investigations, safeguard measures, and potentially deploying anti-coercion tools. This move will enable the EU to implement a variety of tariff and non-tariff responses to Chinese coercion.
Sources mentioned that the EU’s executive arm has consistently emphasized that all its tools are not specifically targeted at China.
Furthermore, sources indicated that in negotiations conducted so far, Beijing has shown openness to increasing imports from the EU but is reluctant to seek ways to control its exports to the EU.
The EU is also striving to extend import permit deadlines for key materials, streamline import procedures, and call for Beijing to relax market access restrictions and reduce exports to the EU. Sources revealed that China hopes the EU will respond equivalently to any changes Beijing agrees to, relaxing EU self-regulation.
Both parties have set a deadline for October to achieve “concrete results.” This timeline aligns with the mandate given to the European Commission by EU leaders in June to develop new tools in autumn to address the current unequal bilateral relationship.
European Commission President Ursula von der Leyen stated in June that if dialogues fail to yield results, the EU will take decisive action.
EU Trade Commissioner Maros Sefcovic will visit China in October to assess progress in the negotiations. This visit coincides with the EU leaders’ summit in Brussels, where this issue will be on the agenda.
According to reports by the Hong Kong-based South China Morning Post, multiple sources confirmed that following the EU’s firmer stance, Beijing made rare hints during last week’s EU-China trade talks in Brussels that it is willing to explore ways to reduce the massive trade surplus with the EU.
In May, the EU’s trade deficit with China increased by 15% year-on-year, with Germany’s trade deficit with China expanding by 31.6%.
As of 2025, the EU-China trade deficit soared to over $410 billion, with EU leaders deeming this figure “unsustainable.”